Here’s the ‘Magic Number’ Each Generation of Women Says They Need To Retire
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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On average, women believe they will need $1.5 million to retire comfortably, according to Northwestern Mutual’s 2024 Planning & Progress Study. But that “magic number” varies drastically by generation. On the high end, Gen X women believe they will need $2.1 million to retire comfortably, while boomer women believe they can do so with just $902,000 in savings. Gen Z and millennial women fall in between, with savings goals of $1.2 million and $1.5 million, respectively.
In this “Financially Savvy Female” column, we’re chatting with Samantha Holowka, wealth management advisor at Northwestern Mutual in Atlanta, about why different generations have such different views on retirement savings needs, how much the average woman actually needs to retire comfortably, and ways for women of every generation to reach their retirement savings goals.
What are some possible reasons that Gen X women believe they will need the most money to retire comfortably?
Their greater expectations could be caused by the particularly challenging time they are facing in their lives — juggling careers, raising kids, taking care of aging parents and more. Recent inflation and cost of living increases for everything are worries for many as well. All of this could reasonably lead to heightened levels of uncertainty when it comes to their financial futures and retirement expectations.
They’re also seeing debates about the future of Social Security, and with retirement on the horizon, they may be adjusting how much they might need to save to retire comfortably in their minds. In addition, having been through so many turns of events and market fluctuations in the last four years can cause unrest. It makes Gen X wonder what is around the corner and what is necessary to ensure their financial security.
What are some possible reasons that boomer women believe they will need the least money to retire comfortably?
The boomer generation experienced a disciplined level of spending. Those good habits are hard to break.
The average woman believes $1.5 million is needed to retire comfortably. Is this a good savings target for most women?
Every person’s lifestyle is unique, and every woman and man must have a financial plan aligned with their specific income needs and wants through the different periods of retirement.
Using the 4% rule for retirement, if someone would hope to withdraw $60,000 in their first year of retirement, they would need about $1.5 million saved. But this rule doesn’t account for the risks of longevity, market volatility (taking out that 4% during a down market and locking in losses that can’t be recovered), healthcare, inflation, taxes and long-term care, which today costs more than $60,000 per year.
One size does not fit all. Women should consider working with a trusted financial advisor to not only invest savings for retirement but help them plan for financial security based on their unique desired lifestyle in retirement.
According to the survey, women of all generations are far behind their retirement savings goals, which makes sense for younger generations but is troubling for those who are in or near retirement. The average Gen X woman is $2 million short of her goal, while the average boomer woman is $801,000 short. What should Gen X and boomer women do to close the gap on a shorter timeline?
To close the gap, women need to form a realistic budget for themselves so they know how much life costs. Then, they need to add a disciplined savings plan to the budget.
Working with a financial advisor can also help them know when they can actually retire based on their savings ability and lifestyle needs. The sooner they face their retirement goal, understand where they stand toward that goal and learn what they need to save to make it happen, the less painful it will be. Continuing to avoid the problem will not make it go away. Delay can just make it worse.
Currently, the average Gen Z woman has $16,000 saved for retirement with a savings goal of $1.2 million, while the average millennial woman has $60,000 saved with a savings goal of $1.5 million. What are some smart strategies women in these generations can implement now to ensure they have sufficient savings when they retire?
Get an understanding of the lifestyle they have now and have a financial advisor measure if they are saving enough to maintain this lifestyle or the one they want. If not, get on a disciplined wealth accumulation (savings) plan and wealth protection plan.
The younger a person starts, the less savings that is needed. Great disciplined savings and investing with a financial advisor they trust to align their goals with their assets and efforts are keys to success over long periods of time.
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